Revised Northrop Grumman pact tightens standards

RICHMOND, Va. - RICHMOND, Va. (AP) - Revisions to Virginia's 10-year, $2.4 billion contract between its computer superagency and its corporate partner tighten performance standards but also extend the pact for three more years.

Gov. Bob McDonnell and Technology Secretary Jim Duffey on Tuesday outlined changes to the Virginia Information Technology Agency partnership that had prompted bitter complaints of poor, slow service by state agencies and a scathing audit by the General Assembly.

The revisions put new pressure on government and defense contracting giant Northrop Grumman, which holds the $236 million-a-year contract, the largest ever written by Virginia state government to a single vendor.

It increases the penalties Northrop Grumman would have to pay for failing to meet performance standards by 15 percent. It also sets up a three-month review period to assess the company's performance through June 25, allowing the state to test its new operational, financial and contractual revisions.

VITA was established in 2003 as a way to consolidate the computing and data management needs of a far-flung patchwork of independent state agency computer networks. The systems were often outdated and had little ability to interact or share information.

But once the VITA-Northrop Grumman partnership was in place and in charge of technology needs as broad as massive computer servers and as narrow as phones and faxes, complaints poured in about slow, unresponsive service and system failures so profound that they sometimes shut down whole agencies.

After a scathing legislative review late last year, the General Assembly passed legislation this year putting VITA under the governor's direct supervision to ensure accountability.

Some legislators pondered whether the state should divorce VITA and Northrop Grumman, but financial penalties in the contract for early termination made that prohibitive.

"We decided early on that the cost of potentially terminating the Northrop Grumman agreement were just not acceptable," McDonnell said.

Northrop Grumman's spokesman, J. Michael Landrum, called the revision "an important step forward" in its partnership with Virginia government.

"There are a number of milestones in front of us to demonstrate continued progress in transforming the IT environment for ... Virginia. We look forward to working with the Commonwealth to jointly complete the milestones," Landrum said.

The revision also extends the contract's life by three years, with a nearly 5 percent inflation allowance for Northrop Grumman during the extension, or an annual boost of about $11 million.

And it includes $105 million in additional state payments to Northrop Grumman over nine years, plus it includes $47 million more to purchase new security measures and disaster recovery protection benefits not included in the original contract.

It requires the state to rebate all but about $1 million of the $16 million it had withheld in contract payments over what the state maintained were performance failures. But it does not allow Northrop Grumman to recover any of the cost increases it sought for additional hardware, storage or licenses during the first four years of the contract.

Other requirements in the rewritten contract include faster incident-response teams and an enhanced dispute resolution process, and performance measures for Northrop Grumman that state agencies can easily track.